IRD chasing students, not speculators

Newsroom report that IRD have 64 staff dedicated to chase up student loan repayments from people who have moved overseas, and none working solely on property speculators who ignore the bright line test.

I don’t think it is this simple, but this does look like a system slanted against students and easy on speculators.

Newsroom: IRD chases students while speculators go free

In spite of the bright-line test having an incredibly low compliance rate, Inland Revenue has no full-time staff chasing property investors who fail to pay what they owe.

The test, which came into effect in late 2015, is designed to crack down on property speculation by automatically taxing profit made on the sale of residential property (other than the main home). Initially it applied to property sold within two years of purchase but earlier this year the Government passed legislation extending it to property sold within five years.

Nearly one in three eligible property investors fails to comply with the test and documents released to Newsroom under the Official Information Act show the compliance rate is worsening. A report given to Revenue Minister Stuart Nash in May estimated bright-line test compliance could be lower than 50 percent. 

Despite this, the IRD has not, in the three years since the bright-line test was implemented, established a team for chasing non-compliance and recovery.

Information released under the OIA to Newsroom said the IRD did not have dedicated teams for bright-line recovery nor did it have a separate budget for bright-line recovery activity. Instead existing staff were used to track down people who had not filed a return for possible tax due under the bright-line test.

In contrast:

This stands in stark contrast to the student loan system, which has 64 staff chasing borrowers who have moved overseas and are behind on their repayments. The team had a budget of $2.245 million for the period July 1, 2017 to January 2018.

This sits on top of more than 3000 staff across IRD involved in some way with compliance activity and debt recovery, including chasing overdue student debt.

The 64 staff employed by the student loan team are “predominantly” tasked with tracking down more than 75,000 overseas borrowers who collectively owe $1.2 billion dollars, according to the latest report from IRD. 

Tax on property speculation is a part of whole tax obligations for those dealing in property, so could be picked up through general tax checks, but it does seem odd that more focus isn’t put on it, given the current and last Governments’ talk on cracking down on property speculation.

NZ First $4.6b student bribe

A significant factor in the 2005 election was Labour’s campaign promise of interest free student loans. They won the election. This policy was later projected to cost about $0.5b per year.

NZ First has a much bigger campaign promise – to wipe loans for students who stay and work in the country. They say it will cost $4.6b a year – but that may not take into account the likely increase in student numbers.

Stuff:  Winston Peters promises to wipe student loans

New Zealand First is promising to wipe student loans for new students who stay and work in the country for five years, and it says that it will only cost $4.6b a year.

People who bond themselves to regions in need of workers or study for less time could wipe theirs even faster.

Under the proposed scheme, the universal student allowance of about $200 a week would cover living costs while the government would cover all of student’s tuition fees upfront.

Every year of study would bond a student to one year of work in New Zealand. So a student who completed a three-year BA would only need to work for three years in New Zealand to pay off their entire loan.

However these fully-funded places would not be guaranteed, with industry groups and a reinstated Careers NZ setting a number of jobs they would need when the degree ended. There would be competition for fully funded places, but also safeguards to preserve diversity.

The policy would only apply to new students.

Martin said the scheme would cost $4.63b a year – only about half a billion more than the Government currently spends and 1.86 per cent of GDP – but both Labour and National said it was fiscally unachievable.

They can’t do it without either National or Labour support and neither could afford that sort of budget without having to significantly cut elsewhere.

She said it was more likely that she could negotiate the scheme in a coalition government with Labour, as the National Party and ACT would likely be philosophically opposed. Labour agreed – broadly.

“If we’re in a position to negotiate with other parties, then obviously more funding for education is something that we are going to be happy to talk about,” Hipkins said.

I expect Labour will have their own budget bribe priorities, and National won’t want to give up their tax cuts and family support package.

Arrest over student loan debt

The Herald ‘understands’ that a woman has been arrested at Auckland airport trying to fly to Australia over a student loan debt.

Woman arrested at airport over student loan debt

The woman was arrested at Auckland Airport as she tried to board a flight to Australia on Tuesday, the Herald understands.

She appeared in Manukau District Court on Wednesday.

An Inland Revenue spokesman confirmed an arrest warrant was executed by police this week.

Taxpayer secrecy prevented the release of more details.

Some say this is draconian butIRD says they only use arrest as a last resort.

“Our powers to arrest at the border are used as a very last resort, and would only follow strenuous efforts to contact the borrower to make repayment arrangements – these would typically involve making phone calls, sending correspondence via mail and email to the borrower, and attempting to contact them via any third parties such as nominated persons and/or any known employer.”

It’s tough, but as much as anyone wants to argue about paying for tertiary education and the student loans system all those who take on a student loan should be aware of their responsibilities of keeping in touch with IRD and in in repaying the loan as and when required.

It is the harshest in a range of measures to recoup student debt from overseas Kiwis. Last year those based overseas made up 15 per cent of all borrowers, but 74 per cent of borrowers with overdue payments, and had 90 per cent of the amount overdue.

Those in default and living in Australia will come under more scrutiny from next month, when a transtasman information-sharing agreement begins. It will cover contact details of student loan borrowers living in Australia.

That could see thousands more borrowers receive warning notices. Accurate contact information is crucial, as a district court judge can issue an arrest warrant only if satisfied a person is knowingly avoiding repayment obligations.

The majority of overseas-based student-loan borrowers live in Australia. Legislation allowing the information-sharing passed last month.

There are about 112,000 overseas-based student-loan borrowers, and roughly 70 per are in default.

Tougher measures seem to be affective.

In January, Cook Islands man Ngatokotoru Puna, 40, was arrested as he tried to leave New Zealand.

Over the first two months of this year there was a 31 per cent increase in repayments by overseas-based borrowers, compared to the same period last year, with $7 million more received.

Emails to IRD were up 62 per cent, and phone calls increased by 55 per cent.

Inland Revenue believe that the publicity around the first arrest at the border contributed to the increased activity.

Some will find this additional information sharing and chasing up of loans tough but being in touch with IRD is the best way to deal with it.

Authorities say those in default should make contact with Inland Revenue, to arrange a repayment agreement or discuss hardship plans if in financial difficulty. Applying for an arrest warrant is a “last resort”, the IRD says.

Student loan defaulters worried

After a student loan defaulter was arrested trying to leave New Zealand NZ Herald reports Worried borrowers swamp IRD lines:

Inland Revenue has received a surge of inquiries from student loan defaulters worried they could be arrested if they return to New Zealand.

This isn’t a surprising reaction to the arrest. Up until now people with student loans have been able to leave New Zealand and ignore their loans with impunity.

One man who ignored his repayment obligations contacted the Weekend Herald from Australia and said he would now be scared to return for funerals or weddings.

Was he not concerned about defaulting on his loan until now? Obviously the threat of arrest is more of a worry but he should have had some feelings of concern about ignoring his responsibilities.

Unpaid student loans is a big problem. People who are overseas account for 90% of overdue loans.

The arrest policy, passed in March 2014, is the harshest in a range of measures to recoup debt from the 110,600 borrowers living overseas. Last year those based overseas made up 15 per cent of all borrowers, but 74 per cent of borrowers with overdue payments, and had 90 per cent of the amount overdue.

There were 5735 borrowers who each owed more than $100,000 last year. Those statistics do not indicate whether they are overseas, but in 2012 the IRD said most of the top 10 debtors were overseas – and each owed more than $290,000.

There’s some big money involved. I wonder about why people would clock up such large loans in the first place, and then think they can leave the country and ignore their debts.

Tertiary Education, Skills and Employment Minister Steven Joyce said if more money could be recouped from overseas borrowers, the cost of the scheme would be reduced significantly.

“The net cash cost of the scheme in the last year was down to $400 million – that is cash out, less repayments. In 2009/10, it was $771m.

“If we can get this overseas-based borrower stuff going, I can see us getting to a point where there is very little more going out [in loans] than what is coming back in [in repayments].”

The cost of unpaid loans impacts on New Zealand taxpayers, and it’s not fair on those who take out loans and are responsible enough to repay them.

Student unions criticised the border arrest policy as draconian and likely to make overseas Kiwis “student loan refugees” – unable to return home for weddings, funerals or other important events.

I think many had effectively already made themselves “student loan refugees”. This only really impacts on those who ignored their loans and kept returning to New Zealand.

The IRD has previously considered overdue borrowers for arrest if they re-entered New Zealand, but in each case the individual has agreed to repayments.

A simple solution – meet your obligations.

Accurate contact information is crucial – an arrest warrant can only be issued if a district court is satisfied a person is knowingly avoiding student loan repayment obligations.

Another simple way to avoid arrest, keep in touch with the IRD, which anyone should do if they owe them (us, the country) money.

If people who are overseas are worried about their student loans they should do what should have done all along, deal with them responsibly.

Should student loan defaulter have been arrested?

The person arrested for not paying his student loan is Ngatokotoru Puna, nephew of Cook Islands Prime Minister.

NZ Herald reported: Man arrested at airport over student loan debt is Cook Island Prime Minister’s nephew

He had been given a $40,000 loan while studying a Bachelor of Arts at Auckland University 20 years ago but said interest had seen it balloon to around $130,000.

He described his ordeal as “unbelievable” after an appearance at Manukau District Court today.

He described the day he got arrested as the worst of his life, “if you don’t count deaths”.

It would be highly embarrassing for him.

His wife, Diane, told the Herald from the Cook Islands that the IRD sent reminder letters to the wrong address.

She was audibly upset when speaking with the Herald, and said the arrest had come as a huge shock to the family.

Puna has lived in the Cook Islands for 13 years, she said. “We never had any contact from IRD about the whole thing,” she said. “They were sending reminders to the wrong address.”

It’s possible they were sending letters to the wrong address. But how does she know that?

Puna, who said he came from a family of “high achievers” said he was pulled aside by Customs staff and initially thought it was about his emergency passport, which he had obtained after losing his original passport.

The father of five daughters said his salary was about $35,000 and his mistake was that he had not contacted IRD when a payrise took him over the repayment threshold five years ago.

He said his plan was never to rack up a huge debt and then ignore it after graduating but accepted he was in the wrong for not keeping in touch with the IRD.

Anyone, especially ‘high achievers’, should know exactly what their responsibilities are if they have a $35,000 loan. They should also be aware of interest and changing balances.

It is tough on Puna to be in the spotlight as the first person arrested for defaulting on his loan, but it had to be someone.

But there are questions about how IRD has dealt with this, and how the law allows them to deal with it. Debts are usually civil matters, not criminal.

Graeme Edgler pointed out some things of concern:

Imprisonment for non-payment of debts is breach of international human rights laws. It is one of very few absolute rights.

Non-imprisonment for debt is one of the ICCPR rights left out of BOR.

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If a loan from the Government is unpaid, they should sue just like every other unpaid creditor.

And:

Who knew? People working in New Zealand’s bases on Antarctica are overseas for student loan purposes and will* be charged interest.

We arrested a Cook Islander for trying to leave New Zealand while in default on student loan obligations? The Cooks are part of New Zealand!

If anyone you know lives in the Cook Islands (or Niue, Tokelau, or Antarctica), and is being charged NZ student loan interest, please tell them that they can apply to be treated as being in New Zealand for loan purposes, so that they won’t be charged interest.

Puna stuffed up by ignoring his loan and his repayment obligations.

But has the Government stuffed up with the law that enabled his arrest?

And has the IRD stuffed up charging him interest, and for getting him arrested when leaving Auckland for the Cook Islands?

This is Wikipedia’s description of the status of the Cook Islands and Cook Islanders.

The Cook Islands is a representative democracy with a parliamentary system in an associated state relationship with New Zealand. Executive power is exercised by the government, with the Chief Minister as head of government. Legislative power is vested in both the government and the Parliament of the Cook Islands. There is a pluriform multi-party system. The Judiciary is independent of the executive and the legislature. The Head of State is the Queen of New Zealand, who is represented in the Cook Islands by the Queen’s Representative.

The islands are self-governing in “free association” with New Zealand. New Zealand retains primary responsibility for external affairs, with consultation with the Cook Islands government. Cook Islands nationals are citizens of New Zealand and can receive New Zealand government services

I guess it depends on the letter of the law.

Student loan defaulter arrested

A student loan defaulter has been arrested when trying to leave New Zealand after a visit here. They have lived overseas since 2004 and are reported to have ignored requests to repay their student loan.

If people living in New Zealand have student loans and earn money they are compelled to repay their loan via Inland Revenue, it is deducted from their earnings.

But many ex-students have left the country and some have avoided paying their loans back. Regardless of views on the student loan system they have taken on a loan that they know they have a responsibility and legal requirement to pay it back.

NZ Herald reports Airport arrest for student debt.

Kiwi living overseas who ignored requests to repay his student loan has been arrested at the New Zealand border after returning home for a visit – the first time the hardline sanction has been used.

The man was detained on Monday while trying to leave the country. He has lived overseas since 2004 and has student debt of more than $20,000.

A law change in March 2014 means student loan borrowers who are well behind on repayments and ignore requests from Inland Revenue may have an arrest warrant issued, stopping them from leaving New Zealand until they resolve their arrears.

This is the first time someone has been arrested under this law.

An IRD spokesman said its powers to arrest at the border were used as “a very last resort”, and followed strenuous efforts to contact the borrower and make repayment arrangements.

Serious defaulters are first contacted to discuss repayment options and are given time to repay some of their loan. Relief from repayments can be granted for hardship reasons, but the man arrested had not made any such application.

IRD generally uses the courts as a last resort when trying to recover tax owed as well.

An arrest warrant can be issued if a court is satisfied that the person has committed the offence of knowingly avoiding student loan repayment obligations, and is about to leave NZ.

A district court can then make subsequent orders that include paying the amount in default, making arrangements for payment, providing security for the payment, not leaving the country without permission, and surrendering travel documents or tickets.

I presume the person arrested was aware of these possibilities, but they chose to return to New Zealand for a visit. If news of their arrest becomes known to other student loan defaulters overseas they are likely to not come back here. But it is also likely them to reconsider their refusal to repay their loans.

The hardline arrest policy has been criticised by the University Students’ Association as likely to make “student loan refugee” into a permanent status, rather than encouraging people to meet their obligations.

But is sounds like they are already ‘encouraged’ to ‘meet their obligations’. If they refuse to do that surely there should be the possibility of consequences.

The option of arrest at the border was modelled on a law that is used to capture people who default on child-support payments. It was designed to target the worst offenders and act as a deterrent to others.

Criminals and alleged criminals can also be arrested if trying to leave the country.

An information-sharing agreement with Australia, expected to start this year, will allow for the exchange of contact details of Kiwi borrowers living in Australia.

Loan defaulters living in Australia will have more difficulty avoiding repayment.

According to the latest student loan scheme annual report, produced by the Ministry of Education, the amount repaid directly by overseas-based borrowers was $184.7 million in 2014/15, up from $158.1 million the previous year.

So many people with student loans living overseas are repaying their loans. And an increasing number of them are repaying their loans. As they should.

Perhaps University should have a compulsory paper – Student Loan Responsibilities 101.